Chinese buyers size up Gunns’ assets

A number of Chinese buyers are circling
Gunns
’ assets, with Shandong Bohui Paper one of the interested parties for the Bell Bay and Tarpeena sawmills, sources close to the situation said.

The timber company, which is under a $560 million debt load, was placed into administration on Tuesday after losing the support of its banks.

It is understood there have been high-level discussions in the past week with Shandong Bohui Paper around the two mills, which employ 350 workers and have an enterprise value of about $100 million.

A heads of agreement had been signed between the two companies.

“Shandong Bohui Paper and Shandong Sun Paper have both been looking at assets outside China," a source said. “Bohui has been the company that has been most active." Both are large pulp and paper companies.

The big question is over the future of the proposed $2.3 million pulp mill project in Tasmania’s north. Any sale of its permits or recapitalisaiton of the mill venture would be tricky, as there is not much local community support and clear political opposition from the Greens – which are in minority government at both state and federal level.

Several sources speculated on Thursday that Gunns permits are not valuable, given the strong community opposition to the project. They say that despite the Chinese need for pulp, a buyer would prefer to build a pulp mill in China, buy Gunns’ forestry estate and ship the woodchips to China rather than deal with the continuing forestry issues in Tasmania.

Kurt Schafer, a vice-president at forestry information company RISI, said China’s wood pulp needs would continue to rise, as would the need for imports of woodchips to make pulp. But large-scale paper-grade market pulp production in China was not sustainable over time, he said.

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Company Profile

Discussions about the assets went on yesterday as funding was secured for the redundancy payouts of 50 workers at the Gunns Lindsay Street headquarters in Launceston.

Managing director
Greg L’Estrange
lost his job on Wednesday night, but will help receiver KordaMentha if needed in coming months.

KordaMentha is understood to be reviewing staff at the Launceston headquarters and at the hardwood business.

It is understood the receivers are conducting a review of staffing levels at the company’s Launceston base and other parts of the business before deciding what other jobs should go.

Gunns’ lending syndicate and state and federal governments had provided the receivers with $1 million to secure workers’ holiday pay, long service leave and award payments, the assistant secretary of the forestry and furnishing branch of the CFMEU,
Leo Skourdoumbis
, said.

Almost a quarter of Tasmania’s $3.22 billion in exports goes to China, the state’s largest single export market. The state government is eager to maintain good relations as it struggles to find investment.

State Opposition Leader Will Hodgman said Tasmania should welcome investment from any Chinese interests, although he had not had formal meetings with any companies.

“The important issue is getting the mill up and running and we would welcome Chinese investment," Mr Hodgman told The Australian Financial Review. “China is our fastest growing market."

The CFMEU has said the Gunns asset would be a “bargain" for incoming investors.

“There is a basket of wood, there is the plant there, there are approvals and there is a market for the product," the union’s national secretary Michael O’Connor, said.